The banking sector will take center stage as the second quarter earnings season kicks off this Friday. Banking giants JPMorgan Chase ( JPM ), Wells Fargo ( WFC ) and Citigroup ( C ) are scheduled to release their earnings results, with investors watching closely to gauge the financial health of the US economy.
Yahoo Finance reporter David Hollerith takes a closer look at what investors and analysts will be watching.
For more expert insight and the latest market action, click here to watch this full episode of Market Domination overtime.
This post was written by Angel Smith
Video Transcript
Big banks kicking off a new earnings season on Friday, including JP Morgan, Wells Fargo and Citigroup for more than we can expect we’re bringing to Yahoo, finds his.
David Holley.
David.
Hey Josh, ahead of the Q2 earnings call.
Uh, operating results are not expected for the country’s four largest banks.
JP Morgan Bank of America, Citigroup and Wells Fargo.
Analysts have described the earnings for this quarter in general from what executives have been pointing to as conservative and muted.
Now, the context is that for much of the past year, the big four lenders, particularly JP Morgan and Wells Fargo have benefited greatly from higher interest rates compared to their smaller rivals.
And since the beginning of the year, all of these banking stocks have been on an incredible run.
They’re up at least 20% outperforming the rest of the industry as well as S and P. Now, the JP Morgan Wells Fargo Citigroup report on Friday, as you pointed out.
And Bank of America reported Tuesday, um they’re all expected to show a higher gain in their investment banking income compared to last year’s net income, though it’s expected to decline on a year-over-year basis for all these institutions are based on analysts’ expectations.
And that has a lot to do with high street operations, just taking deposits to make loans.
They are under pressure from higher interest rates in terms of credit and deposit costs.
These banks are thus charging on the investment banking front.
As I mentioned, all of these banks will benefit, but it also creates a different story for JP Morgan.
Sorry, Morgan Stanley and Goldman Sachs, both of which are more focused on investment banking.
Uh They’re likely to have a much better quarter in terms of their bottom line earnings.
Well, in general, analysts are going to be concerned about what these banks are going to say in terms of guidance, based on how things are going with higher interest rates, particularly credit, credit quality for these banks.
But how can they fare if interest rates are cut later this year.
It all comes down to their net interest income guidance, which again is their biggest source of profit and we’ll want to see if those banks can stick to it.
Uh As an example, JP Morgan has recently said that it has not, it has been earning from the net interest of Bank of America Income.
On the other hand, he ended the second quarter with an increase in the second half of the year.
And David, I’m also curious, what we’re hearing about the capital markets, businesses for many of these banks.
Right.
And, and how they did, in the second quarter.
Yes.
So Julie, um, compared to a year ago, uh they look a lot better.
Um, Goldman Sachs in particular, they’re coming off a particularly rough quarter from last year, but compared to last quarter, um the beginning of the year, investment banking is not as strong, but again, I that’s all about That said, it looks a lot better than anything seen last year.
Um And this has a lot to do with the recovery in the capital markets.
So it still looks pretty good.
And obviously there’s going to be a lot of uh, analysts questioning whether or not something is changing, uh given the Fed’s current path.
OK.
Well, we’ll see what all the numbers show when we start getting them on Friday.
David.
Thank you very much.